E-commerce has pitfalls for online news

DavidB. Wilkerson

BERKELEY, Calif. (CBS.MW) -- A group of Web-related professionals said various forms of advertising will remain apotent source of revenue for online news companies but create possible conflicts of interest that offset some of that potential.

At "Online Journalism: From the Medium to the Message," a day-long conference held Wednesday at the University of California at Berkeley, industry players examined issues of credibility, the economics of the new medium, innovations in interactivity, and other important topics.

During a discussion of the economic side of the business, a number of panelists agreed that banner ads, advertorials and other inserts are becoming increasingly important revenue streams as the Internet is used more widely. But they also concurred that there are pitfalls.

Kara Swisher, Silicon Valley reporter for The Wall Street Journal, said Web readers often don't know "which advertisers paid a little bit more" to have their ads placed on a page containing a story related to their particular businesses.

John Battelle, president of The Industry Standard, said that he hopes hat news pages can "make the distinction clearer" between advertising and journalistic content.

Ultimately, though, he said the winners will be the sites that offer the most informative data.

"Opinions are cheap," said Hal Varian, dean of Berkeley's school of information management and systems. "You can get opinions all over the Web. But ... authoritative information will have a value."

Some audience members suggested that paid subscriptions will be the ultimate savior of online publications.

Swisher acknowledged that the online version of the Journal "does pretty well," with about 300,000 paid subscribers, and that advertising won't save the vast majority of Web-based news organizations. But she doesn't think gated sites are the final answer, either.

"They're going to get sucked up into a big chunk [by larger media companies]. I don't see what the alternatives are other than that, for most of them," she said.

'Rooms full of millionaires'

Absorption into bigger entities like CBS (CBS)
CBS, -1.60%
and Disney (DIS)
DIS, +1.43%
makes financial sense, the panel agreed, but there again one finds problems.

Michael Lewis says he often finds himself asking, "What the hell happened?"

Lewis, a contributing editor for the New Republic and a contributing writer to The New York Times Magazine, said he narrowly missed an opportunity to cash in on the lofty valuations currently being assigned to online news organizations.

A few years ago, he was offered a writing job at TheStreet.com, an online provider of financial news. His deal would've included a 2-percent equity stake in what was then a new venture, and an option to buy an additional 2 percent at a later date. Lewis turned down the job, preferring to write for the established, far-reaching New York Times.

After the Times' recent purchase of a multi-million dollar interest in TheStreet.com, Lewis realized that his 4 percent would've been worth between $5 million and $12 million.

Lewis said the New York Times (NYT)
NYT, +1.08%
and other traditional media companies have poured so much money into online publications recently because they realize they're creating a "self-fulfilling prophecy."

"They know people will figure, 'If the New York Times was interested ... maybe I should be interested, too,' " creating a snowball effect that keeps money rolling in, Lewis said.

Swisher said the big money creates temptations that will be difficult to resist. "When you've got a room full of reporters who are millionaires whose fortunes are tied to the stock market," she said, it may be hard to be objective about certain stocks.

Swisher added that her Dow Jones sister company CNBC "goes a little far in throwing out stocks" at viewers without disclosing whether or not the person discussing the stock on the air actually owns shares.

She finds that increasingly, financial journalism is "driven by day traders" who want recommendations on which stocks to buy but don't want to take the time to read substantial information about the companies they invest in.

When Microsoft spent "millions of dollars" to create quality content for its own network of financial sites, Swisher said, "they found that people really didn't want that."

But choice is the key to the Web's viability, said Varian. What people do want, they may very well be willing to pay for. There are sites now, he pointed out, that allow a reader to choose between pages with banner ads and ad-free pages that require a subscription fee.

Online journalists have recently made a concerted effort to examine the role of media, the Internet and accurate reporting. See related story.

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, the publisher of this Web site.

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